The Poverty of Renewables

According to UN Secretary-General Ban Ki-moon, “Climate change harms the poor first and worst,” because the poor are the most vulnerable and have the least resources with which to adapt. But, because current policies to address global warming make energy much more costly, they harm the world’s poor much more.

MIAMI – According to UN Secretary-General Ban Ki-moon, “Climate change harms the poor first and worst.” This is true, because the poor are the most vulnerable and have the least resources with which to adapt. But we often forget that current policies to address global warming make energy much more costly, and that this harms the world’s poor much more.

Solar and wind power was subsidized by $60 billion in 2012. This means that the world spent $60 billion more on energy than was needed. And, because the total climate benefit was a paltry $1.4 billion, the subsidies essentially wasted $58.6 billion. Biofuels were subsidized by another $19 billion, with essentially no climate benefit. All of that money could have been used to improve health care, hire more teachers, build better roads, or lower taxes.

Forcing everyone to buy more expensive, less reliable energy pushes up costs throughout the economy, leaving less for other public goods. The average of macroeconomic models indicates that the total cost of the EU’s climate policy will be €209 billion ($280 billion) per year from 2020 until the end of the century.

The proposed remedy can be worse than the disease because to subsidize green technologies will cause the economy to paralyze, thereby hurting the chances to invest in new, and more efficient clean technologies. What policy makers are telling us is that "we must clean the planet first and then we must grow," when the most sensible option is to continue to grow, develop new technologies and then start cleaning the planet efficiently. Unless you buy into global warming alarmist, we can do a better job by moving gradually into clean technologies.

Fossil fuels could become more expensive someday, and we will need something cheaper with which to replace them, but we don't know when that will happen. The consequences of our remedy for that contradict the reasons for seeking a remedy in the first place, when our remedy has the effect of making energy more expensive right now. Which is worse, more expensive someday wherein "someday" could be beyond our great grandchildrens' lifetimes for all we know, or more expensive right now? The consequences of implementing a proposed replacement for fossil fuels should be consistent with all of our reasons for doing so, which means that it must be cheaper. There could be other reasons, too, but at the very least a replacement must be cheaper. The obvious mistake here was that the replacements for fossil fuels have not been cheaper.

It means you're spending too much because the subsidy wouldn't be necessary if you were paying for conventionally sourced energy. The subsidy all represents extra costs someone needs to pay to get the same amount of energy from the subsidized source.

Question is not just about subsidies but the most economically efficient mechanisms to reflect the true costs of carbon emissions. A revenue neutral carbon tax with transfers to the lowest income households to offset increased costs is one of the better options, as unpalatable as it may be politically at least in the United States.

A quick comment:
According to IMF (2013), fossil fuel subsidies summed up to $480bn in 2011, compared to IAE's estimates of subsidies for renewables in 2011, $88bn.
I guess when talking about subsidies, the global picture should be taken into account.

Dear Timothee. Yes, absolutely, we should get rid of both fossil and renewable subsidies. But remember, that almost all of the fossil fuel subsidies are in third world countries, and have nothing to do with global warming. They're essentially ways to placate the electorate (like damaging subsidies to grain and bread). See perhaps my article on this at WSJ: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCkQFjAA&url=http%3A%2F%2Fonline.wsj.com%2Fnews%2Farticles%2FSB10001424127887324432404579051123500813210&ei=do0wU4q9JYTYyQHHiIDQBA&usg=AFQjCNEGf9O-B9AS8T4PJhb3ApuKMAqy2g&sig2=a2Bya7Rwld2y5IXMpXtSpg&bvm=bv.62922401,d.aWc

I've always enjoyed Lomborg's insight into our current global Climate Change/Environmental discussion politicians, academics, and students are having the world all over. However, I still believe that his viewpoint is misguided. As any sane person today knows, combating climate change and environmental degradation requires substantial challenges resulting in substantial sacrifices. Yes, I share the belief that the poor have the right to enjoy the same benefits the rich have for so long, but not at the expense of prolonging an adequate and thorough solution to environmental degradation.
An individual with the stature that Mr. Lomborg has should aim their efforts to finding a quick solution, and not prolonging the issue.
I also want to mention that both sides (developed and developing) must cut back, and not just one. This, I believe, should be the focus of Mr. Lomborg, and not combating current efforts.
If the international community does not do something soon, then it is very possible that many more of the poor might continue facing a growing energy inequality. The sooner something is done, the sooner we can all benefit from our planet's sustainable resources.

New Comment

Pin comment to this paragraph

After posting your comment, you’ll have a ten-minute window to make any edits. Please note that we moderate comments to ensure the conversation remains topically relevant. We appreciate well-informed comments and welcome your criticism and insight. Please be civil and avoid name-calling and ad hominem remarks.

Log in/Register

Please log in or register to continue. Registration is free and requires only your email address.

Log in

Register

Emailrequired

PasswordrequiredRemember me?

Please enter your email address and click on the reset-password button. If your email exists in our system, we'll send you an email with a link to reset your password. Please note that the link will expire twenty-four hours after the email is sent. If you can't find this email, please check your spam folder.